Correlation Between Home Depot and CLP Holdings
Can any of the company-specific risk be diversified away by investing in both Home Depot and CLP Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Home Depot and CLP Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and CLP Holdings, you can compare the effects of market volatilities on Home Depot and CLP Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Home Depot with a short position of CLP Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and CLP Holdings.
Diversification Opportunities for Home Depot and CLP Holdings
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Home and CLP is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and CLP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLP Holdings and Home Depot is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Home Depot are associated (or correlated) with CLP Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLP Holdings has no effect on the direction of Home Depot i.e., Home Depot and CLP Holdings go up and down completely randomly.
Pair Corralation between Home Depot and CLP Holdings
Allowing for the 90-day total investment horizon Home Depot is expected to generate 2.11 times more return on investment than CLP Holdings. However, Home Depot is 2.11 times more volatile than CLP Holdings. It trades about 0.3 of its potential returns per unit of risk. CLP Holdings is currently generating about 0.0 per unit of risk. If you would invest 39,169 in Home Depot on September 1, 2024 and sell it today you would earn a total of 3,744 from holding Home Depot or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Depot vs. CLP Holdings
Performance |
| Timeline |
| Home Depot |
| CLP Holdings |
Home Depot and CLP Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and CLP Holdings
The main advantage of trading using opposite Home Depot and CLP Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot position performs unexpectedly, CLP Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CLP Holdings will offset losses from the drop in CLP Holdings' long position.| Home Depot vs. Floor Decor Holdings | Home Depot vs. Arhaus Inc | Home Depot vs. Haverty Furniture Companies | Home Depot vs. Lowes Companies |
| CLP Holdings vs. Southern Company | CLP Holdings vs. Duke Energy | CLP Holdings vs. Duke Energy | CLP Holdings vs. National Grid PLC |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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